TLDR:
- Nvidia stock fell 1.6% in premarket trading after AI cloud provider CoreWeave’s earnings guidance disappointed investors
- CoreWeave plans up to $23 billion in capital expenditure while carrying heavy debt
- Nvidia recently rejoined the $3 trillion market cap club alongside Apple and Microsoft
- Saudi Arabia deal could provide new source of AI chip spending
- Analysts believe Nvidia could become the first $4 trillion stock due to stronger growth prospects than competitors
Nvidia shares dropped in early Thursday trading after one of its major clients, CoreWeave, delivered disappointing guidance that weighed on AI-related stocks. The pullback comes just as Nvidia had regained its position in the exclusive $3 trillion market cap club, joining tech giants Apple and Microsoft.
CoreWeave, an AI cloud services provider that rents out remote servers using Nvidia chips, beat revenue expectations in its Wednesday earnings report. However, the company warned that its operating profit would be hit by increased investment plans.
While CoreWeave didn’t raise any specific concerns about demand, investors grew cautious about its planned capital expenditure of up to $23 billion. This spending plan, combined with the company’s substantial debt load, created market jitters.
Nvidia shares fell 1.6% to $133.23 in premarket trading after gaining 4.2% on Wednesday. The earlier rise had followed CEO Jensen Huang’s announcement of a deal with Saudi Arabia’s state-backed AI firm Humain.
The Saudi deal may signal a new source of spending on AI chips. Saudi Arabia and other countries are looking to build their own data centers, potentially creating fresh demand for AI hardware providers like Nvidia.
Market Position and Valuation
Nvidia first reached a $3 trillion market cap in June 2024 but fell below that threshold during a market sell-off earlier this year. The recent rebound has helped the company rejoin this exclusive club.
While Microsoft currently sits closest to the $4 trillion milestone, many analysts believe Nvidia has a stronger chance of reaching it first. This outlook is based on Nvidia’s growth prospects compared to its mega-cap peers.
Wall Street expects Nvidia’s earnings to grow by around 47% this fiscal year and 29% next year. By comparison, Apple’s earnings are projected to increase 18% this year and 9% next year, while Microsoft is expected to deliver growth of almost 14% this year and nearly 13% next.
Nvidia’s forward earnings multiple of 26.9 is slightly lower than Microsoft’s 30 and Apple’s 27. This relatively lower valuation, coupled with higher growth expectations, gives Nvidia more room to run.
Trade Tensions and Market Uncertainty
Nvidia’s recent stock performance has been impacted by trade tensions. The Trump administration’s restrictions on exports of H20 GPUs to China led the company to announce a $5.5 billion writedown in the first quarter of 2025.
White House tariffs on Chinese imports and China’s retaliatory measures also weighed on Nvidia’s share price. However, recent signals that Chinese tariffs might be lower than initially feared, along with a 90-day pause on some tariffs, have provided reasons for optimism.
CFRA analyst Angelo Zino remains bullish on Nvidia’s prospects. “We believe Nvidia’s content growth story in data centers will extend through at least 2027, supported by its product pipeline including B300, Rubin, and Rubin Ultra,” Zino wrote in a Wednesday research note.
Other chip stocks also retreated following CoreWeave’s results. Advanced Micro Devices slipped 1.9%, Intel was down 2%, Marvell Technology fell 2.1%, and Arm Holdings was 1.4% lower in premarket trading.
For Nvidia to reach a $4 trillion market cap, it would need to grow approximately 25% from its current level. While some analysts believe this goal is achievable within the next 18 months, economic uncertainties and potential tariff impacts could extend the timeline.
The most recent market data shows Nvidia trading with renewed volatility as investors continue to assess the impacts of global trade policies on the AI chip leader’s growth trajectory.
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